Lazarus economy continues to thrive

Mr Frydenberg has previously said the government would not begin to undertake the process of "budget repair", a euphemism for winding back the stimulus and beginning to pay down the debt, until the earlier target was reached.

The last set of unemployment figures came in at 5.6 per cent, just .5 per cent higher than before the pandemic. While this was excellent news it was also problematic given nobody had expected this point to be reached until well after the 2021 budget a fortnight from now.

With the next federal election expected to be held before the end of May next year, the last thing the government wants to do is to announce the removal of economic stimulus leading to a possible economic slowdown.

That said, there is a lot more to this story than just the politics. Although the initial unemployment target of "comfortably under six per cent" is within reach, inflation and wages growth remain stubbornly low.

Mr Frydenberg has not plucked the new target out of thin air. It is based on Treasury modelling which indicates there will be little or no movement in these areas until unemployment is significantly lower than in 2019.

Given the government, the unions, the Reserve Bank, and a majority of private sector economists are in furious agreement about the need for wages growth to pick up, the obvious thing to do was to keep the economic stimulus flowing for a while yet.

When Mr Frydenberg rose to address the Australian Chamber of Commerce and Industry on Thursday morning he was in the fortunate position of being able to outline a course of action that was, on the one hand, politically expedient and, on the other, the economically responsible thing to do.

This unusual set of circumstances has put Labor in a difficult position given that only a short time ago it, and many commentators, were predicting an economic and employment apocalypse in the wake of the withdrawal of JobKeeper and the abolition of the JobSeeker supplement.

Instead of growing by 150,000 as had been predicted by Treasury, unemployment in the fortnight to April 16, immediately following the conclusion of JobKeeper, actually fell by 46,000. That, as Paul Keating once famously said, is "a beautiful set of numbers".

"As the JobKeeper program concluded in March, job ads rose to reach an all-time high and the number of jobseekers for every vacancy fell to its lowest level in over a decade," Mr Frydenberg said.

The stock market definitely thought so. The All Ordinaries index soared to an all-time record high of 7,358.8 in the wake of Mr Frydenberg's address. It closed slightly down at just under 7,350, still well above its previous closing peak of 7,328 on April 19.

This spike in investor confidence, which mirrors consumer and business confidence at record or near record levels, was also fuelled by the Treasurer's commitment not to undertake "any sharp pivots to austerity".

While Mr Frydenberg did not hide the fact the billions that have been borrowed will have to be repaid, he is banking on the significant gap between the projected rate of economic growth and record low interest rates to do much of the heavy lifting.

That said, given the government's "core values have not changed" there will be a return to austerity further down the track; but not until the 2022 election is well out of the way.

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